Will public health trump patents in Congress?

Last of two parts

THE ANTI-HYPERTENSION drug Norvasc, manufactured by Pfizer, is well-known among doctors here and abroad for its efficiency and efficacy. But Dr. Rosan Badon does not prescribe the medicine to her patients at community health clinics in Bagong Silang, Caloocan and Dagat-Dagatan, Navotas.

“They can’t even afford to buy medicine that costs P5, how can they ever afford one that costs eight times more?” asks Badon. In fact, even though a generic equivalent was introduced in the market last year, Norvasc was still being sold at P44.76 per five-mg tablet and P74.57 per 10-mg tablet as of last August. In India, Norvasc retails at what amounts to P8.74 per five-mg tablet and P17.09 per 10-mg tablet. In Pakistan, it is priced even lower, and can be had for P5.98 per five-mg tablet and P8.95 per 10-mg tablet.

The World Health Organization (WHO)-commissioned book Drugs and Money: Prices, Affordability and Cost Containment cites four main reasons for steep drug prices: costs invested in research and development; factors that tend to create monopolies like patent protection; third-party payers that make consumers less price sensitive; and consumers’ attitudes that tend to use price to judge the quality and efficacy of a drug.

Still, Ireneo Galicia, former Intellectual Property Office (IPO) deputy director general, argues that patents are primary to blame for the high cost of medicines in the Philippines. He says, “(To) an extent that a patent gives monopoly to a patent right owner, it gives the owner some leeway in dictating the price of a patented medicine.”

Unwittingly, too, Philippine intellectual-property laws have been protecting the monopolies of multinational drug companies. It is telling that from 2001 to August 2006, only two of the 2,296 pharmaceutical patents issued by the IPO were local.

DOCTORS are up in arms against a provision in House Bill 2844 restricting them to prescribing only generic medicines to their patients. [PCIJ file photo]

In proposing amendments to the Intellectual Property Code (Republic Act 8293), observers and legislators alike thus believe both the Senate and House affordable-medicines bills are on the right track. For one, they say, these trace the situation of overpriced drugs to the country’s legal structure of intellectual property and trademarks. Indeed, six years after the so-called Doha Declaration, Philippine intellectual property law has yet to incorporate many of the flexibilities provided in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).

Provisions for the ‘flexibilities’

Introduced to the international trading system in 1994, the TRIPS Agreement is a set of intellectual property rules, largely patterned after the U.S. intellectual-property regime that, among others, grants drug patent protection for 20 years. Apprehensions by developing countries over the agreement’s impact on public health led to a “development round” of negotiation of new trade rules that later produced the Doha Declaration.

Among the flexibilities under the Declaration are parallel importation (allowing countries to import a patented product marketed in another country at a lower price), compulsory licensing, and government use (allowing governments to temporarily override a patent and authorize production of generic equivalents of patented medicines in the public interest).

As expected, though, multinational drug companies are against the proposed amendments to the intellectual property law. They say these are discriminatory and violate the Constitution’s due process and equal protection clauses. The firms also say the proposed changes are inconsistent with international treaty obligations of the Philippines.

One of the amendments they object to is present in both Senate and Lower House bills and follows the lead of other countries like the United States, Canada, Australia, Israel, Argentina, and Thailand: it allows a generic manufacturer to start preparing a generic version about two years before a drug’s patent expires. Thus, as soon as the patent expires, the generic equivalent is ready for selling in the market. This is commonly called the early working or “Bolar provision,” after a 1984 U.S. case law decision.

Here in the Philippines at present, it is only after a drug’s patent coverage is up (a fixed period of two decades) that a generic manufacturer can start doing research or conduct its own tests to produce a generic equivalent. Such a process, Galicia says, takes from anywhere between 18 to 24 months.

The drug firms are also against a common provision in both bills that excludes from patent protection “new uses” of a previously patented product or process. The rationale for this provision — which is patterned after amendments in the India Patents Law and is present in both the Senate and Lower House bills — is the phenomenon of “evergreening.” This consists of the patenting of minor changes to existing products (e.g. formulations, dosage forms, polymorphs, salts, etc.), thereby extending artificially the protection conferred by the original patent over a drug. The tactic has caused the proliferation of frivolous patents on just about any demonstrable “new use” — and denies people access to drugs whose patents have actually expired.

Table 4: What the House and Senate Bills Propose
Source: HB 2844, SB 1658
Pertinent Amendments to the Intellectual Property Code (RA 8293):

Non-Patentable Invention/Inventive Step House version amends definition of non-patentability in the case of drugs or medicines, excluding from patent protection “mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy, safety and purity of that substance, or the mere discovery of any new property or new use for a known substance, or the mere use of a known process, unless such known process results in a new product that employs at least one new reactant.” (Section 22)

Senate version amends definition of inventive step to mean the same as above. (Section 26)

Parallel Importation and International Exhaustion of Intellectual Property Rights for Patents Both versions allow the government to import and resell a patented product marketed in another country at a lower price, without the consent of the patent holder. (Section 72.1)
Experimental Use Senate version modifies Section 72.3 as an exception to patent rights: the experimental use of the invention for scientific or educational purposes and other activities directly related to said scientific or educational experimental use. None
Early Working (‘Bolar Provision’) Both versions allow generics companies to experiment and test for regulatory approval of generic versions of drugs before the expiration of their patents. (Section 72.4)
Government Use Senate version includes non-commercial use of the patent by the patentee as part of the conditions that allow government to exploit a patent without the consent of the patent holder.

House version adds two more conditions: a national emergency or other circumstance of extreme urgency requiring the use of the invention; or the demand for the patented article in the country is not being met to an adequate extent and on reasonable terms, as determined by the Department of Health. (Section 74.1)

Compulsory Licensing Both versions allow compulsory licensing so that the government can easily set aside patent restrictions in response to public health threats subject to certain conditions, including situations of national emergency or circumstances of extreme urgency. (Section 74)
Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health None House version introduces new section to implement 6 of the Doha Declaration on the TRIPS Agreement and Public Health to make effective use of compulsory licensing by countries with insufficient or no manufacturing capacity. (Section 93A)

More objections

The way the Pharmaceutical and Healthcare Association of the Philippines (PHAP) sees it, though, Section 22 in House Bill 2844 and Section 26 in Senate Bill 1658 discriminate against pharmaceutical inventions and goes against the three basic requirements of patentability: novelty, inventive step, and industrial application.

PHAP says that the IP Code has sufficient safeguards against double patenting and evergreening, which, the association says, do not have a significant impact on access to medicines. After all, it argues, only one percent of the drugs in WHO’s List of Essential Drugs are patented, with the rest already outside the patent system.

But Bureau of Food and Drug (BFAD) Deputy Director Joshua Ramos counters, “What if the one percent with patents are the ‘miracle drugs’ needed by large numbers of people? Also, those that are already off-patent as new molecules — the 99 percent they claim — may again be patented for new use without the provision preventing patentability based on ‘new use.’”

PHAP’s arguments actually go to the heart of the pharmaceutical industry’s justification for strengthening the regime of intellectual property protection, which is that it provides an incentive to develop innovative drugs and allows it to recoup investments on research and development (R&D).

Yet a report by the U.S. National Institute for Health Care Management (NIHCM) makes this assumption of innovation among pharmaceutical companies suspect. From 1989 to 2000, says the NIHCM, only 35 percent of the approved 1,035 new drug applications in the U.S. Food and Drug Administration (FDA), were products with new active ingredients. The rest had active ingredients already available in an approved product. Over half (54 percent) were in fact incrementally modified drugs or new versions of available medicines. Eleven percent out of the supposedly new drugs, meanwhile, contained the same active ingredient as identical marketed products.

PHAP’s list of objections, however, includes the House bill’s provision on parallel importation. Citing the lack of an adequate infrastructure and effective monitoring systems to monitor parallel imports and prevent entry of counterfeit drugs into the country, PHAP says that substandard medicines and counterfeit drugs could proliferate through uncontrolled parallel importation.

Yet an industry insider concedes that with or without the bill, the problem with counterfeit drugs (those that are marketed without BFAD registration) and fake medicines (illegally manufactured copies of the original) exists. He says that along with substandard medicines, these constitute an enforcement matter involving BFAD and has nothing to do with the intent of the bill to provide quality, affordable medicines. “It’s a classic obfuscation tactic,” admits the insider.

BFAD’s Ramos also says there is “no real threat” as the agency, together with law enforcement agencies, can easily detect counterfeit drugs. Besides, medicines that will be subject of parallel importation will have to be registered with BFAD. The agency is also tasked to conduct the necessary post-market surveillance.

“The counterfeit medicines issue is not a real issue,” remarks Elpidio Peria. An associate of the Third World Network that is among the various nongovernmental organizations supporting the Senate bill, Peria explains that most, if not a large majority, of the pharmaceutical products that will be brought in through parallel imports are the same products produced by the same pharmaceutical firms already operating in the country.

“It is a fact,” he adds, “that these same companies imported from their mother units or manufacturing bases and made money out of the price differentials between the Philippines and the countries from where these products were sourced.”

But a healthcare professional who was once part of the Department of Health (DOH) says that while the parallel importation provision in the House bill is “relevant,” it is nevertheless “too simplistic.” He says there are no protocols to ensure checks and balance; neither are there provisions to ensure that imported drugs would come from firms complying with current good manufacturing practice and from legitimate wholesalers and consolidators. He also notes the lack of punitive clauses for those who would import or manufacture substandard generic drugs.

The non-manufacturing drug industry

The healthcare professional adds that the provision on compulsory licensing (which the World Trade Organization says happens “when a government allows someone else to produce the patented product or process without the consent of the patent owner”) practically means nothing since Philippine drug manufacturers have no technical capacity to make drugs in the true sense of the term. “What we do have,” he says, “is secondary manufacturing which is compounding, tableting, and capsuling.”

For sure, given its total dependence on imported raw materials and chemicals, the Philippine pharmaceutical industry cannot be considered a true drug industry. Although almost 90 percent of drugs sold are locally produced, Philippine drug companies are mainly compounders, formulators, and packagers. The big pharmaceutical firms either import their products or have them toll manufactured at the foreign-owned Inter-Phil Laboratories.

Yet while the Philippine drug industry remains far from having India’s economies of scale and the heavy investments in science and technology, there are now a few local companies like United Laboratories, Elin Pharmaceuticals, and Pascual Laboratories that are engaged in the manufacture of active substances. Besides, says BFAD’s Ramos, if the country invokes the Doha Declaration on the TRIPS flexibilities, compulsory licensing can be extended to countries with manufacturing capability to cover the needs of those without such capability.

Still, for all the hopes being pinned on the passage of the affordable medicines law to either usher in amendments to the Intellectual Property Code, or a drug price regulation scheme, or both, there are those who acknowledge it is not going to be a magic pill.

“No bill filed in the 14th Congress could single-handedly lower the price of medicines,” admits Akbayan party-list Rep. Ana Theresia Hontiveros-Baraquel. She says that to bring down the exorbitant price of medicines in the country, a more comprehensive legislation is necessary.

Such a situation is rooted in a complex mix of problems involving dynamic forces that affect the market, the industry, doctors and health professionals, and patients, plus the reality of national poverty. What future legislations will have to provide are solutions to the issues that observers say the current bills failed to address. Among these are the fundamental problems of market failure in pharmaceuticals, the need for true quality generics competing fairly in the Philippine market, the need for monitoring and limiting unethical promotions, advertising, and marketing practices that influence prescribing and add to the cost of drugs.

In the meantime, doctors like Rosan Badon who deal with impoverished patients have become innovative. Badon says she has even resorted to prescribing traditional Chinese medicine to some of her very poor patients, reasoning that it would be useless anyway to prescribe a modern drug that they will not be able to afford.

For hypertensive patients, for example, Badon recommends tiny pechay seeds that are stuck to a piece of bandage and are then placed at the back of one’s head. “This is actually part of acupuncture,” says the doctor, who is also an acupuncturist. She also explains that the treatment is part of a holistic approach. “We also advocate a low-salt diet and a healthy lifestyle,” she says.

But Badon says extremely poor patients see a doctor only when they already feel very ill, which makes it more difficult to treat them. Ironically, that is almost always because they feared they would not be able to afford the medicine they needed to get better in the first place.